MediaTek, MStar Merger Gets China's OK

LONDON — A previously stalled $4 billion merger between consumer electronics IC companies MediaTek Inc. and MStar Semiconductor Inc., both based in Hsinchu, Taiwan, has received approval from China's antitrust regulator but with conditions covering the sale of LCD TV chips.

MediaTek acquired a 48 percent stake in MStar in August 2012 but since then has been battling to gain approval from authorities in Taiwan, South Korea, and China for a total merger and has postponed the closing deadline for the deal multiple times. (See: MediaTek, MStar merger delayed.)

MediaTek and MStar are public companies that design and sell SoCs that go in smartphones and other consumer and multimedia electronics. MediaTek is particularly strong in chips for smartphones.

The Chinese authorities were the last regional authority to rule on the proposed merger. The Ministry of Commerce has posted its findings on its website, including the requirement that MediaTek and MStar continue to compete in digital TV controller chips for three years after the merger completes. MStar must delist from the Taiwan Stock Exchange and become a subsidiary company of MediaTek but continue to operate separately for three years; and MediaTek must then reapply to have that condition lifted. However, MStar's handset and wireless business units are expected to be incorporated within MediaTek.

MediaTek has still to submit a detailed plan to the Ministry of Communications on how it will effect the merger, and the closing date for the deal has now been postponed three months to Feb. 1, 2014.

The restrictions placed by Chinese governments does look strict. I wonder what exactly this will accomplish. Better pricing deals for Chinese TV OEMs on TV chips they need to source, or buying time for china's indigenous chip companies to emerge before MTK totally dominates China's TV chip market?

If MStar folds its handset and wireless business units into MediaTek it will leave it as a subsiduary that only does TV chips. Maybe MediaTek will just give up trying to compete with itself...and be the wireless, smartphone, tablet IC provider.

My understanding is that Mstar has solid TV chip business in China. The reason why MTK wants that TV market segment (beyond their growing
smartphone market) is that those two segments will continue to get interconnected. Look no further than Qualcomm. They too want to get into smart TV chip business.

Junko, I was thinking much along the same lines as your post: it may take another 2-4 years for the LCD/TV landscape to change, however, I think the convergence of smartphones with consumer electronics devices (of all types) is now nearing a juncture where its finally ready to transform the TV. That will drive more overlap in chips and software.

The 'smart TV chip' business and mobile device chip business are being driven closer together and successful vendors must work to drive functionality across both environments. I've called that the 'seat to the street' experience which focuses on mode of use rather than a particular device definition.

A challenge for Mediatek will be to provide a more unified approach between to the rapidly gowing clone SmartPhone and consumer electronic markets. That will require a greater focus on contributing to a comon software ecosystem.